Announced But Not Yet Confirmed: £488 Rise For State Pensions

I would like to see the Personal Allowance increased for pensioners so that the state Pension is not subject to tax.

Casdon

This years average:
According to Unbiased, single pensioners report an average total income of about £17,264 annually, while broader household figures from the Office for National Statistics sit closer to £23,557.

That accords with DWP numbers which say the average weekly income for a single pensioner After Housing Costs (AHC)* in 2025 was £332 (x 52 = £17,264).

www.gov.uk/government/statistics/pensioners-incomes-financial-years-ending-1995-to-2025/pensioners-incomes-financial-years-ending-1995-to-2025

That would be £16,325 after income tax.

That’s an average for men and women. The men’s number was £350 and women £325.

Single women are the poorest pensioners making up 60% of all Pension Credit claimants so many will have had an income below that level. In 2025, PC topped up weekly income to £227.10.

*After Housing Costs is derived by subtracting rent, water rates and charges, structural insurance premiums, mortgage interest payments and ground rent, and service charges from income before housing costs.

Ive worked out mine based on that being a percentage of the full state pension. I don't get a full state pension. Mine is £1319 less per annum than a full state pension and because I have a private small occupational pension it works out that I will get a princely sum of £8 a week extra if that information is correct.

A statement has come from the government confirming that anyone whose State Pension increase takes them over the tax threshold will not see that increase taxed.

Much of my State Pension will not see the RPI increase as it only applies to the basic pension, not the various additions and extras. Fortunately I have other pensions, not just my own but part of my late husband’s, both state and occupational.

So does that apply to people who have a full SP and also a secondary one? As in, will the SP part of the pension stay tax free even if you have paid into an occupational one, too?

If not, then over time, tax would wipe out the point of having paid into a work pension for all those years.

I am £2,000 per annum better off now on my Pensions (inherited husband's unclaimed Pension including SERPS plus very small work pension plus Civil service Widow's Pension) than in 1998 when I had a full time job and still had a child at school. (This increase is after taking inflation and tax changes into account).

Add to that the fact that a kind Aunt left me almost enough to buy my now ex-Council house just before the price surge and I have paid back the small mortgage I persuaded someone to give me at the age of 65 so I no longer pay rent - and I feel so lucky. And rich!

How people who still have to pay the exorbitant rents of today manage to survive on our "generous" old age pension I really don't know, and I have had plenty of practice at living off thin air in the past. Because I lost the habit of spending money many years ago and now own my house I don't need the increase, but many people do need it - and more.

Doodledog

So does that apply to people who have a full SP and also a secondary one? As in, will the SP part of the pension stay tax free even if you have paid into an occupational one, too?

If not, then over time, tax would wipe out the point of having paid into a work pension for all those years.

Sorry I should have said it seems to apply only if the increase in SP would put you in the tax payer bracket, though the detail has not been made clear yet.
I would guess that ought also to mean that if your income is made up of a smaller SP plus some other pension and is currently under the tax threshold, then the increase in SP won’t be taxed. But doesn’t the other pension have annual increases too? A grey area. We’ll have to wait for clarification.

There was a comment on the News earlier and although it was hedged about a bit, the gist seems to be that it applies only to those with the SP as their only source of income, so those who paid into an occupational pension will lose 20/40% of any increases from now on and they won't.

I mean, it kind of happened before, as it's your total income that is taxed, but it seems to me wrong that those who pay to make themselves as independent of the state as possible lose out to those who haven't, again. It's basically a way of means-testing, isn't it, as both groups have paid into the SP, but only one group is taxed on the SP, and eventually the occupational pension will be taxed away. People who can't save a lot will fail to see the point of bothering, and who can blame them?

It must be a very tiny occupational pension if at the end the recipient is not better off, even after tax.

Maybe, and definitely at this stage, but the gap will narrow over time, and reduce the difference, which is what I’m saying.

The SP should rise, IMO, as should the tax threshold, but IMO it should never be counterproductive to contribute. Maybe that will change with AI, though. Nothing stays the same.

I agree with Doodledog that it only applies to those who receive the State Pension and have no other incone. Although one is allowed to earn up to £1,000 p.a. imterest on savings before it is taxed.

Apparently there is no way of taxing people who only receive the State Pension but I do not see why they cannot complete a self-assessment form so that the tax can be recovered.

I have been paying tax on my State Pension since the 2024/25 tax year and the tax at is taken from my company pensions.

I already complete self Assessment for other reasons. I think avoiding everyone having to do so because of the SP increase is what is behind this. It is just not worth the cost and hassle, and would alienate voters.

I think you are right, Cabbie.

It doesn't always require Self Assessment. HMRC already has Simple Assessment for cases where there is a straightforward underpayment of tax.

There is no mechanism to automatically collect tax on State Pension if there is no other source of income against which to operate a tax code.

As it is, we are already in the realm of K codes. These are negative tax codes where the untaxed income (and/or adjustment for previous year underpayments) to be taken into account exceeds the tax personal allowance of £12,570.

K codes are limited in that an employer or pension provider cannot deduct more than half of your pre-tax wages or pension in any single pay period. In other words, if the source against which a K code is operated is small, say a small occupational pension, then the person could still end up owing tax at the end of the year.

The government have insisting on keeping the tax personal allowance at £12,570 even though the freeze introduced by Sunak was only meant to last for two years. Hunt extended it and Reeves extend it further. There is no indication that Healey is about to change this.

If £12,570 is the threshold above which the government has decided people should pay tax then allowing one very specific part of demographic to be let off if their income is just over 13,000 is opening a can of worms.

This could be similar to what happened over Winter Fuel Payment in 2024 when people in receipt if Pension Credit could claim it but those just over the cliff edge on full nSP could not. The Pension Credit cut off is always left at a rate just under the rate off nSP to deliberately cut off a whole swathe of people from being able to claim the other benefits that Pension Credit claimants can, such as help with dental and eye care costs, Warm Home Discount and free TV Licence if over 74.

HMRC has informal “tolerances” anyway, small sums of underpaid tax they can write off, usually up to £50 or so but that has always been done on a case by case basis and not on a larger scale for a particular demographic.

For 2027/8, full new State Pension and no other income will incur a tax liability of £93. Effectively HMRC will be increasing the tolerance to £100 - but only for some. But then what happens the following year and the year after if the tax personal allowance remains frozen?

We shall have to see what Healey announces about this, but if he isn’t going to apply this to others who have the same aggregate income but where there is the mechanism to collect the tax, then it is going to be unfair.

On the one hand, there’s the argument that if you know you need to be paying £2 a week in tax, then put it aside. On the other hand, having to issue thousands of Simple Assessment every year to collect small amounts of tax is a lot of work for little return.

There are already many people who have State Pension in excess of the tax personal allowance. There are over 800,000 people who have SP in excess of £350 a week, over £18,000 a year. Those will be people who paid into SERPS/SSP. They may never have been in a works pension scheme so have no other source of income against which to operate a tax code. They will have been paying the tax for years.

It would be a lot simpler and fairer if the tax age allowance was reintroduced. It worked for 40 years before George Osborne abolished it in 2015. It operated on a tapering scale so it would work to keep the poorest pensioners out of the tax net without workarounds, but without giving advantage to better off pensioners. That would not go down well while intergenerational warfare over the State Pension continues to be stoked.

I will lose .you £ 7 a week pension credit

Aren't these figures based on the triple lock which some are now saying is unaffordable. It will affect those on the new pension rate. As I have an occupational pension, I have paid tax since retirement despite being on the old state pension rate.
I don’t mind paying tax at all as I benefit from the NHS, etc, etc plus I get my bus pass, free eye test, free prescriptions, but I would struggle if I was only on SP despite being mortgage free and careful with my income .

I agree, Susieq, and feel the same. The last thing I want is to see people on low incomes struggle, but on principle I dislike systems that work against people who contribute via tax and insurance to benefit those who don't.

If anything, although I dislike means-testing, I would rather see it applied to those on low individual pensions living in households with high incomes/savings. There would be problems with that, too, I know (means-testing is never fair), but it would mean that say, someone who didn't work for many years and paid a lower stamp doesn't end up being free of tax despite having a partner with a high pension, when her sister who worked from 16-66 and paid full stamp throughout is taxed because she has a small occupational pension to which she struggled to contribute.

I don't want to be punitive, I am absolutely not looking for ways to make the poor poorer - far from it - and I don't struggle financially myself. But I have done voluntary advice work with women who fell foul of the SPA changes, and have seen how far the system favours the better off at the expense of those with little (and of those who chose to work and save towards older age, but find that they would have been better off if they hadn't).

My husband is about to turn 80 and was very excited to receive a letter about his pension increase due to his age - 25p! Another neighbour has just received the same, honestly not worth sending a letter about this surely?

There are approximately 68% on the old state pension, and roughly 32% on the new state pension, if people are only in receipt of the old one they won't be paying tax.

A bit of history:

The 25p supplement was introduced in 1971 through the National Insurance Bill by Sir Keith Joseph. He said:

… it was intended to recognise: albeit in a small way the special claims of very elderly people who on the whole need help rather more than others ... As they grow old their possessions wear out and they need help for necessary jobs which they used to do themselves. He explained that, as a result of its introduction in 1971, a single person over 80 on the standard rate pension would get £6.25 a week.

Why the age addition has never been increased

The addition has never been increased. It was specifically excluded from the statutory index linking provisions of the Social Security Act 1975 (now replaced by section 150 of the Social Security Contributions and Benefits Act 1992). The Labour Government did float the idea of raising the age addition in their discussion document, ‘A Happier Old Age’ in 1978. The Conservative Government recognised the extra expenses faced by older pensioners in their White Paper, “Growing Older”, but made no recommendations on the age addition.

Governments of both parties have generally resisted suggestions that the age addition should be increased, either arguing that greater priority should be given to maintaining or increasing the basic rate of benefit, or choosing to target additional resources on older pensioners by other means, for example, through means tested benefits or lump sum payments, such as the Winter Fuel Payment.

In an Adjournment Debate on 26 June 2007, Labour MP, Jeff Ennis, suggested that: we should scrap the 25p age addition and, by way of compensation, raise the winter fuel allowance for the over-80s by a minimum of £25 a year. That policy change would find favour with pensioners, who undoubtedly like the winter fuel allowance.

More here:

researchbriefings.files.parliament.uk/documents/SN00321/SN00321.pdf

HMRC has "tolerance" for small amounts of tax owed? Really? They adjusted my tax code because they reckoned I had exceeded the £1,000 of interest allowed last year and owed them £16!

So this year I have moved some savings from my Building Society account into my ISA.

I didn't say they write off all tax underpayments. They have discretion. If there's an easy way to collect it like a simple coding adjustment they will. Now that tax is digital, a lot is done automatically.

Casdon

Sarnia

Casdon

Sarnia

I suppose this is to soften the blow that the triple lock is going.
Pensions are not a level playing field so £488 will not be the sum being received by all pensioners.

Where has that information come from Sarnia? I haven’t seen any announcements.

I do think it will be a percentage rise, the pension regulations would need to be changed for it to be anything else, surely, and would have significant financial implications.

I was answering the OP's headline and post. I hadn't heard it either. Just saying that Pensions isn't the same for everyone so not everyone will receive the £488 in the OP's headline.
Ask Margs where she got it from as it was her post.

Sorry, I don’t make myself clear, I meant the statement about the triple lock?

The question about the triple lock being scrapped comes up frequently in the media at the moment. Everyone, especially John Healey is very reticent about confirming this, one way or the other. The general feeling amongst politicians and financial advisors is that it is not sustainable.

I really don't like these headlines stating a figure saying how much pensioners will get as we're all different, living in different circumstances.

I'll just wait, rely on those who calculate my pension for a living to sort out my pension allowance and what tax is due and be grateful for any rise. What I dread is the likelihood of having a self assessment tax form heading my way!

"I really don't like these headlines stating a figure saying how much pensioners will get as we're all different, living in different circumstances."

Me neither, NfkDumpling.
It's designed to stir up unrest.

Has anybody bothered to work out how pension credit and benefits work out to b? PC + council tax benefit, social tariff for water and sky, yes sky, heating allowances, multiple. Surely that pushes someone above the tax limit. I’m in favour of taxing all benefits so if u go over the limit u pay. Organisations seem to be falling over themselves to give additions to PC but not to the ones who are just over the limit to qualify.